Financial Ratios as Predictors of Bankruptcy in Slovenia: A comparison of non- parametric, semi-parametric and parametric techniques. Abstract Financial stability of companies is of concern to employees, investors, bankers and government and regulatory authorities alike. Indeed, recent literature on global financial downturns includes the theory that balance sheet fundamentals may provide warning of impending crisis. This paper presents five alternative techniques that can be used in a study regarding financial ratios as predictors of Slovenian corporate failure, evidenced as bankruptcy. First, non-parametric and parametric techniques are compared in the variable selecting process. Second, semi-parametric techniques and standard logit model are discussed in predicting default. The case of Slovenia is chosen, since it is a transition country and a new member EU state, with the financial market still underdeveloped relative to the »old« EU. In such an economy development of robust models for predicting bankruptcy is of immense value. References Altman E.I.: Predicting financial distress of companies: revisiting the Z-score and zeta models, working paper, 2000. Hardle W.: Testing a parametric model against a semiparametric Alternative, Econometric Theory 10: 821—848, 1994. Horowitz, J.L.: Nonparametric Estimation of a Generalized Additive Model with and Unknown Link Function, Econometrica, 69, 499-513, 2001. Horowitz, J.L. and V.G. Spokoiny: An Adaptive, Rate-Optimal Test of a Parametric Mean-Mean-Regression Model against a Nonparametric Alternative, Econometrica, 69, 599-631, 2001. Ichimura Hidehiko: Semiparametric Least Squares (SLS) and Weighted SLS Estimation of Single Index Models, Journal of Econometrics 58(1/2), 71-120, 1993. Klein Roger and Richard Spady: An Efficient Semiparametric Estimator of the Bynary Choice Model, Econometrica 61, 387-421, 1993. Manasse P., Roubini N., and Schimmelpfennig A.: Predicting Sovereign Debt Crises, IMF Working paper 221, 2003.
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